Gulf Coast Package Farmin and Capital Raising - Eight Well Gulf Coast Drilling Program - Otto Energy
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Gulf Coast Package
Farmin and
Capital Raising
Eight Well Gulf Coast
Drilling Program
31 July 2018
ASX : OEL
1
NOT FOR DISTRIBUTION IN THE UNITED STATES
Disclaimer (refer also to slide 34)
This investor presentation (Presentation) has been prepared by Otto Energy Limited (ACN 107 555 046) (Otto or the Company). This Presentation has been prepared in relation to Otto's fully underwritten
pro-rata accelerated non-renounceable entitlement offer of new ordinary fully paid shares in Otto (New Shares) (Offer) to be made under section 708AA of the Corporations Act 2001 (Cth) (Corporations Act)
as modified by the Australian Securities and Investments Commission (ASIC). The Offer will be made to:
• eligible institutional shareholders of Otto (Institutional Entitlement Offer); and
• eligible retail shareholders of Otto (Retail Entitlement Offer).
Not an offer
This presentation is provided for information purposes only and is not a disclosure document as defined under the Corporations Act 2001 (Cth). This presentation does not constitute an offer, invitation,
solicitation or recommendation with respect to the purchase, sale or issue of any securities or any financial product nor does it constitute financial product or investment advice. This Presentation does not
contain all the information that may be required for evaluating the Company's assets, prospects or potential opportunities and is not intended to be used as the basis for making an investment decision.
A retail information booklet for the Retail Entitlement Offer (Retail Information Booklet) will be available following its lodgement with ASX. Any eligible retail shareholder who wishes to participate in the
Retail Entitlement Offer should consider the Retail Information Booklet in deciding whether to apply under that offer. Anyone who wishes to apply for New Shares under the Retail Entitlement Offer will need
to apply in accordance with the instructions contained in the Retail Information Booklet and the entitlement and acceptance form that will accompany it.
The release, publication or distribution of this Presentation (including an electronic copy) outside Australia may be restricted by law. If you come into possession of this Presentation, you should observe
such restrictions and should seek your own advice on such restrictions. Any non-compliance with these restrictions may contravene applicable securities laws. Refer to the ‘International Offer restrictions’
section of this Presentation for more information.
Not for release or distribution in the United States
This Presentation may not be released or distributed in the United States.
Commence drilling planning for a exploration well in
either
This Presentation does not constitute an offer to sell, or a solicitation of an offer to buy, any securities in the Unitedthe SM-74
States or anyor VRjurisdiction
other 232 block in which such an offer would be illegal. The New Shares
have not been, nor will they be, registered under the U.S. Securities Act of 1933, as amended (U.S. Securities Act) or the securities laws of any state or other jurisdiction of the United States.
Accordingly, the New Shares may not be offered or sold, directly or indirectly, to persons in the United States, unless they have been registered under the U.S. Securities Act (which Otto has no obligation or
intention to do or procure), or are offered and sold in a transaction exempt from, or not subject to, the registration requirements of the U.S. Securities Act and any other applicable securities laws of any
state or other jurisdiction of the United States.
Continue to screen and acquire new value accretive
Disclaimer
opportunities leveraging Otto’s current relationships, its
Neither the Underwriter, nor any of its or Otto's respective advisers or any of their respective affiliates, related bodies corporate, directors, officers, partners, employees and agents, have authorised,
permitted or caused the issue, submission, dispatch or provision of this Presentation and, for the avoidance production andexcept
of doubt, and knowledge of SMI-71
to the extent referredand
to inthe
this adjacent
Presentation, none of them makes or
purports to make any statements in this Presentation and there is no statement in this Presentation which is area
basedand its statement
on any new Houston
by any ofbased
them. office capability.
To the maximum extent permitted by law, Otto, the Underwriter and their respective advisers, affiliates, related bodies corporate, directors, officers, partners, employees and agents exclude and disclaim
all liability, including without limitation for negligence or for any expenses, losses, damages or costs incurred by you as a result of your participation in or failure to participate in the Offer and the
information in the Presentation being inaccurate or incomplete in any way for any reason, whether by negligence or otherwise.
To the maximum extent permitted by law, Otto, the Underwriter and their respective related bodies corporate, Selectshareholders,
the most high impact,
advisers, lowest
affiliates, risk
related Alaskan
bodies corporate, directors, officers, partners,
employees and agents make no representation or warranty, express or implied, as to the currency, accuracy, exploration opportunities
reliability or completenessforofdrilling in Q1
information 2019
in this Presentation and, with regards to the
Underwriters, their advisers, affiliates, related bodies corporate, directors, officers, partners, employees and agents, have not independently verified any such information and take no responsibility for any
part of this Presentation or the Offer.
The Underwriter and its advisers, affiliates, related bodies corporate, directors, officers, partners, employees and agents make no recommendations as to whether you or your related parties should
participate in the Offer nor do they make any representations or warranties to you concerning the Offer, and you represent, warrant and agree that you have not relied on any statements made by the
Underwriters, or any of their advisers, affiliates, related bodies corporate, directors, officers, partners, employees and agents in relation to the Offer and you further expressly disclaim that you are in a
fiduciary relationship with any of them.
The information in this presentation is current as at the date on the cover of the presentation and remains subject to change without notice, in particular the Company disclaims any intent or obligation to
update publicly any forward-looking statements, whether as a result of new information, future events or results or otherwise.
You acknowledge and agree that:
• determination of eligibility of investors for the purposes of the institutional and retail components of the Offer is determined by reference to a number of matters, including legal and regulatory
requirements, logistical and registry constraints and the discretion of Otto and the Underwriters; and
• each of Otto, the Underwriter and its respective advisers, affiliates, related bodies corporate, directors, officers, partners, employees and agents disclaim any duty or liability (including for negligence) in
respect of that determination and the exercise or otherwise of that discretion, to the maximum extent permitted by law.
Otto reserves the right to withdraw or vary the timetable for the Offer without notice.
By attending an investor presentation or briefing, or accepting, accessing or reviewing this Presentation you acknowledge and agree to the terms set out in this important notice and disclaimer.
OTTO ENERGY | ASX : OEL 2
Gulf Coast Package Highlights
Eight well farm-in to Gulf Coast drilling package with Hilcorp Energy
• Large prospective resource provides material upside to Otto upon success
through production growth
• Portfolio of eight high probability of success, technically independent prospects
generated off new proprietary 3D seismic
• Highly experienced and privately owned US Gulf Coast operator Hilcorp Energy
to execute drilling and development program
• Near/Onshore locations with identified access to infrastructure with rapid, low
capex pathway from discovery to production upon success
• Attractive deal terms with potential for further drilling opportunities beyond the
initial eight wells
• Significant exploration activity with the Hilcorp eight well portfolio added to the
existing program of Bivouac Peak and Alaska North Slope provides exposure to
10 drilling events over the next 18 months
OTTO ENERGY | ASX : OEL 3
Portfolio of Gulf Coast prospects Gulf Coast Drilling package complements Otto’s existing position in the Gulf of Mexico OTTO ENERGY | ASX : OEL 4
Gulf Coast Package – Drilling Program
Eight independent prospects committed to be drilled
Net
Planned Target Working
Prospect Rig Revenue Stratigraphic County/
Spud Depth Interest Location
Name Type Interest Interval Parish
Date (TVD), ft (WI)
(NRI)
Big Tex Sep-18 13,500 Barge 37.50% 29.51% Tex Plaquemines Louisiana
Lightning Oct-18 14,500 Land 37.50% 28.50% Frio Tex Miss Matagorda Texas
Don Julio 2 Dec-18 11,500 Land 37.50% 28.50% Oligocene Chambers Texas
Mustang Jan-19 17,500 Land 37.50% 30.00% Oligocene Chambers Texas
Beluga May-19 13,000 Barge 37.50% 28.50% Oligocene Galveston Bay Texas
Oil Lake Jul-19 14,500 Land 37.50% 29.06% Frio Cameron Louisiana
Tarpon Jul-19 14,000 Barge 37.50% 29.06% Oligocene Galveston Bay Texas
Mallard Nov-19 11,000 Barge 37.50% 29.63% Mid Miocene Assumption Louisiana
US$’ million
Total Drilling Costs (Otto’s 50%) 33.5 Otto will be assigned a 37.5% working interest by
paying 50.0% of the costs of drilling and setting casing
Land Costs (up front) (Otto’s 50%) 4.0 or plugging and abandoning at each prospect.
Otto share of Exploration Costs (50% to earn 37.5%) 37.5
OTTO ENERGY | ASX : OEL 5
Gulf Coast Package - Prospects
Highly prospective portfolio based on new proprietary 3D seismic
Prospective Resources1
MMboe
Prospect Net Probability
Working
Name Revenue of Success 100% Otto Net Revenue Interest
Interest
Interest
P90 P50 Mean P10 P90 P50 Mean P10
Big Tex 37.50% 29.51% 54% 0.5 3.3 6.8 16.9 0.1 1.0 2.0 5.0
Lightning 37.50% 28.50% 45% 0.9 3.2 4.4 10.1 0.3 0.9 1.3 2.9
Don Julio 2 37.50% 28.50% 44% 0.7 2.5 4.0 9.6 0.2 0.7 1.1 2.7
Mustang 37.50% 30.00% 56% 2.9 6.7 8.5 16.8 0.8 1.9 2.6 4.8
Beluga 37.50% 28.50% 45% 0.8 2.9 4.7 11.2 0.2 0.9 1.3 3.4
Oil Lake 37.50% 29.06% 45% 1.2 3.3 4.4 9.3 0.3 1.0 1.3 2.7
Tarpon 37.50% 29.06% 34% 7.7 24.0 35.6 81.0 2.2 7.0 10.3 23.5
Mallard 37.50% 29.63% 64% 0.2 0.9 3.3 4.5 0.1 0.3 1.0 1.3
1 Prospective Resources Cautionary Statement
The estimated quantities of petroleum that may potentially be recovered by the application of future development projects relate to
undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further appraisal
and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons.
Refer slides 32 and 33 and the ASX announcement dated 31 July
OTTO ENERGY | ASX : OEL 2018 for further information on prospective resources disclosure. 6
Gulf Coast Package - Timing
Potential of the Eight Well Portfolio
Comparison of SM 71 reserve base with Gulf Coast Package prospective resources
120
P10 P50 P90
SM 71
100
80
Probability of Success %
Mallard
Big Tex Mustang
60
Lightning
Oil Lake
40
Tarpon
Don Julio 2 Beluga
Bivouac Peak
20
For the Gulf Coast Package prospects, the size of bubble is proportional to the P90-P50-P10 Net Revenue Interest Prospective Resource (MMboe)
For SM 71, the size of bubble is proportional to 30 June 2017 Net Revenue Interest 2P reserves (MMboe) (Refer slide 24)
For Bivouac Peak, the size of bubble is proportional to best estimate Net Revenue Interest Prospective Resource (MMboe) (Refer slide 16)
0
Anticipated Drilling Sequence
Refer slides 32 and 33 and the ASX announcement dated 31 July 7
OTTO ENERGY | ASX : OEL
2018 for further information on prospective resources disclosure.
Gulf Coast Package Potential
Risked Portfolio Potential to materially increase Otto’s US business
Risked Summary data - 8 Well Portfolio, Gross (8/8ths)
Metric P90 P50 P10
Volumes, MMBOE 4.63 19.86 64.59
Peak Production Rate, BOE/d 3,270 9,990 31,300
% Hydrocarbon Liquids per BOE 13% 28% 56%
Finding cost, US$/BOE $13.62 $3.18 $0.98
Finding & Development cost, $16.40 $5.51 $2.56
US$/BOE
Refer to slide 33 for notes on the calculation of the risked portfolio information above.
OTTO ENERGY | ASX : OEL 8
Tier 1 Operator - Hilcorp
Partnering with operator with proven capability to take exploration prospects into production
• Founded in 1989, Hilcorp is one of the largest privately held oil and natural gas
companies in North America.
• Hilcorp has nearly 2,000 employees and currently produces approximately 325,000
boepd (Australia’s largest oil and gas company, Woodside, produces ~230,000 boepd).
• Hilcorp has been consistently recognized for its strong culture, values and ethics both
within the firm and in the communities in which it operates.
• Hilcorp specializes in reinvigorating legacy oil and gas fields across North America;
including in the US Gulf Coast, Alaska and the Rockies.
OTTO ENERGY | ASX : OEL 9
Pipeline of Opportunities
Otto has assembled an exciting pipeline of upcoming activities
2018 2019
Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019
SM 71 Low-cost production
Gulf of
Mexico Bivouac Drilling
Peak Preparation Success Case Facility Construction
Exploration Drilling
Big Lightning Beluga Tarpon
Hilcorp Tex
Don Mustang Oil Lake
Gulf Coast Julio 2 Mallard
Package
Western Blocks Western Block
Rig procurement and permitting
Alaska Well
Central Blocks Possibility of
Operator funding and well planning
1-2 Wells
OTTO ENERGY | ASX : OEL 10Gulf Coast Package - Key Terms Commitment to eight well drilling program with Hilcorp Energy • Otto commits to participate in a firm eight well program with a right of first offer to a subsequent program, if Hilcorp elect to offer a program to third parties. • Should either the Tarpon or Mustang prospects be successful then Otto has ground floor rights to participate in the nearby Damsel and Corsair/Hellcat opportunities in addition to the other eight wells. • Otto to earn a 37.5% working interest by paying 50.0% of the costs of drilling and setting casing or plugging and abandoning at each prospect plus lease acquisition costs. The estimated cost of the commitment to Otto is US$37.5 million. • Well Cap - Otto has the option to discontinue participation in each prospect well if actual costs exceed the approved expenditure budget by 20%. If Otto elects to not continue, it will forfeit rights to that prospect. • Program Cap - Once Otto has incurred a total amount relating to the initial eight wells of US$42.5m, it will have the option to elect (but not the obligation) to participate in the remaining undrilled prospects in the initial eight well program. If Otto elects to not participate in any undrilled prospects, it will forfeit rights in those prospects. OTTO ENERGY | ASX : OEL 11
Capital Raising Summary
Otto is undertaking a A$20 million equity raising via a A$10 million placement and a
1 for 9 underwritten entitlement offer
• Equity raise of up to approximately A$20 million:
Capital • A$10 million institutional placement
Raising • 1 for 9 underwritten accelerated non-renounceable entitlement offer to existing shareholders
Structure to raise up to approximately A$10m
• Approximately 339.6 million New Shares will be issued under the equity raise.
• The offer will be priced at A$0.059 per New Share, which represents:
Pricing • A 7.8% discount to the close on 30 July 2018
• A 6.5% discount to the TERP of $0.063
• The funds raised will complement cash on hand and future cash flows from Otto’s 50% owned SM 71
Use of
producing oil field in the Gulf of Mexico to fund Otto’s full exploration program over the next 18 months,
Proceeds
including the Gulf Coast Package, Bivouac Peak and Alaska.
Underwriting • The entitlement offer is fully underwritten by Morgans Corporate Limited.
Raising • The equity raise will be carried out by Morgans Corporate Limited as Lead Manager to the placement
Syndicate and Underwriter to the rights issue.
New • New Shares issued under the equity raising will rank equally with existing ordinary shares.
Shares
Pre-
• Directors intend to take up their full entitlements and sub-underwrite A$400,000 of the entitlement offer.
commitments
OTTO ENERGY | ASX : OEL 12Timetable for Capital Raising
Timetable for Non-Renounceable Entitlement Offer
Announcement of the Equity Raising 31 July 2018
Institutional Entitlement Offer and Bookbuild opens 31 July 2018
Institutional Entitlement Offer and Bookbuild closes 1 August 2018
Results of Institutional offer announced and trading halt lifted 2 August 2018
Shares trade ex-entitlement 2 August 2018
Record date for determining Eligible Shareholders 2 August 2018
Retail Entitlement Offer opens and Booklets despatched 7 August 2018
Settlement of New Shares issued under the Placement and Institutional Offer 9 August 2018
Allotment and normal trading of New Shares issued under the Placement and
10 August 2018
Institutional Entitlement Offer
Retail Entitlement Offer closes 21 August 2018
Allotment of New Shares issued under the Retail Entitlement Offer 29 August 2018
Despatch of holding statements and normal trading of New Shares 30 August 2018
Note: Dates and times in this release are indicative only and subject to change. The Company reserves the right, subject to the Corporations Act, ASX Listing Rules and other applicable
laws, to vary the dates of the Entitlement Offer without prior notice, including extending the Entitlement Offer or accepting late applications, either generally or in particular cases, or to
withdraw the Entitlement Offer without prior notice. The commencement of quotation of New Shares is subject to confirmation from ASX.
OTTO ENERGY | ASX : OEL 13Focused growth strategy in the Gulf of Mexico
Otto’s core strategic goal is to grow Why Gulf of Mexico?
production to 5000 boepd by the end of 2020
• Building a portfolio of US conventional • Proven prolific hydrocarbon province where
production assets with a Gulf of Mexico focus technologies such as RTM seismic processing
and the capability to transition to an operator continue to create new opportunities
• Low sovereign risk
• Growth strategy underpinned by strong
production and cash flow from flagship Gulf of • High margin oil with breakeven economics
Mexico SM 71 asset around US$20/barrel
• Exciting pipeline of high impact exploration • Short cycle time from discovery to development
opportunities taking place over the next 18 8-18 months
months
• Low cost drilling and development
• An experienced team with a track record of • Relatively low risk exploration
successfully growing, operating and divesting oil
and gas assets globally who understand risk and • Deal flow is liquid and a full spectrum of
capital management opportunity size is available
• Otto has area expertise and well developed
business relationships
• Otto has production in the area
OTTO ENERGY | ASX : OEL 14South Marsh Island 71 (SM 71)
Generating over US$3m in free operating cashflow each month
• Production commenced in March 2018, currently producing ~4,000
bopd of high-margin LLS oil into nearby pipeline
• At WTI of US$70/bbl Otto will realise ~US$65.50/bbl net (after
transport and before Federal royalties)
• Oil and gas sales for the quarter to 30 June 2018 totalled 165,120
bbls of oil and 121,599 Mcf of gas generating revenue of US$11.2
million before royalties and operating costs
• 50:50 JV with operator Byron Energy (BYE:ASX)
• Operated tripod platform with capacity for up to 6 production wells
and 5,000 bopd (currently three wells are installed and the platform
is close to handling capacity)
• Further hydrocarbon-bearing sands have been intersected during
drilling and should provide follow up production opportunities
• Operator is undertaking a large 3D seismic reprocessing program,
including over SM 71, which will be utilised in future exploration
and development planning
• Otto has secured rights to participate in the Vermillion 232 (VR 232)
lease which is adjacent to SM 71 and provides future incremental
opportunities de-risked by the SM 71 drilling successes
SM 71 F Production Platform (Gulf of Mexico)
OTTO ENERGY | ASX : OEL 15Bivouac Peak
32 MMboe1 conventional gas/condensate prospect to spud late August 2018
• Otto to participate in drilling the high-impact Bivouac
Peak gas/condensate prospect at 40% WI
• 32 MMboe1 high quality, amplitude supported
conventional gas/condensate prospect in the highly
productive Atchafalaya Bay transition zone of Southern
Louisiana
• 18,294 ft MD/18,000 ft TVD well targeting upper and
middle Miocene reservoirs in East Prospect will cost
US$10.8m (100%)
• Drilling to commence late August 2018 and is expected
to take approximately 75 days
• Estimated completion and development costs to bring
a discovery into production are US$9-11 million with
the well on production within 8-10 months from initial
discovery
• Future follow up Bivouac Peak Deep prospect ~20,000
ft (TVD) in a success case - 13.4 MMboe1
• Otto to pay 53.33% to earn a 40% WI (up to a cap of
US$5.33m then pro-rata)
BIVOUAC PEAK BEST ESTIMATE PROSPECTIVE RESOURCES1
GROSS OTTO 40% WI OTTO 29.8% NRI Joint Venture
Prospect Oil Gas MMBOE Oil Gas MMBOE Oil Gas MMBOE Otto Energy 40%
(MMbbl) (Bscf) (6:1) (MMbbl) (Bscf) (6:1) (MMbbl) (Bscf) (6:1)
Byron Energy (ASX:BYE)
East 11.3 125.6 32.2 4.5 50.2 12.9 3.4 37.4 9.6
Deep 4.7 52.1 13.4 1.9 20.9 5.3 1.4 15.5 4.0 (operator) 43%
Total 16.0 177.7 45.6 6.4 71.1 18.2 4.8 52.9 13.6 Metgasco (ASX: MEL) 10%
1 As at 30 June 2017. Refer Otto ASX release of 9 July 2018.
Private US Entity 7%
OTTO ENERGY | ASX : OEL 16Alaska
Otto to Drill Large Nanushuk Oil Prospect on the Alaska North Slope in Early 2019
• 400 MMbbl2 gross best estimate prospective resource
target on the Alaska North Slope. Otto’s 18.75% net
revenue interest (before Great Bear 10% back in – refer
table) would be 75 MMbbls2.
• Drilling target is a direct analogue to the Horseshoe-1/1A
oil well drilled in 2017¹ located less than one mile to the
west.
• Horseshoe-1/1A is part of the billion barrel plus Nanushuk
oil play-fairway, one of the largest recent conventional oil
discoveries on the Alaska North Slope¹.
• Dry hole well cost:
• US$15m (100%) / US$3.75m (OEL share)
• US$3 million (US$0.75m OEL share) performance bond
• Performance bond posted with Alaska DNR by 31 July
2018 and refunded if the well is drilled before 31 May
2019
The relevant interests in the Western Blocks under the commercial agreements are as follows
• Oil Search’s (OSH) Pikka discovery to the west and the (subject to regulatory approval by the State of Alaska):
Current Post-transaction
Conoco-Phillips Meltwater unit facility ~10 miles to the Working Working Interest Paying Interest Net Revenue Working Interest
east. Interest (before back-in) (before back-in) Interest*
(before back-in)
(after back-in)
Otto Energy 10.8% 22.5% 25.0% 18.75% 20.0%
• Nearby infrastructure ensures cost effective route to 88 Energy (Drilling - 36.0% 40.0% 30.00% 32.0%
market in event of a discovery. Project economics will be Management)
Red Emperor - 31.5% 35.0% 26.25% 28.0%
further enhanced by the shallow nature of the oil pool.
Great Bear 89.2% 10.0% - 8.33% 20.0%
Petroleum**
State of Alaska - - - 16.67%
1. Referenced from the Repsol press release of 9 March 2017. 100% 100.0% 100% 100% 100%
2. Refer ASX release dated 25 June 2018. *Government royalty of 16.67%. **Currently Operator of record on leases.
OTTO ENERGY | ASX : OEL 17Why Otto Energy?
An emerging mid-tier oil and gas producer underpinned by cashflow to fund growth
• Low cost oil producer generating significant cashflow – SM 71 free cashflow of
US$3m per month at US$70/bbl WTI
• Significant activity - extensive drilling campaign with at least 10 wells to be
drilled over the next 18 months
• High Probability of Success (POS) prospects - multiple opportunities to
materially expand reserves, production and cash flow
• Strong financial position and production base to capitalise on additional
opportunities in line with strict investment criteria
• Experienced exploration and commercial team with a track record of value
creation and risk management, complemented by quality project partners
OTTO ENERGY | ASX : OEL 18Why invest in Otto? High margin producer with compelling valuation metrics OTTO ENERGY | ASX : OEL 19
Additional
Information
2Corporate Snapshot
Capital Structure Funding Position4 Shareholders
Fully paid ordinary shares 1.531b Cash US$6m Molton Holdings 20.0%
Performance Rights 18.8m Convertible Note Liability US$8.2m Perennial Value 7.9%
(repayable 30 June 2019) 3 Management
Convertible Notes (US$1 per note)3 8.2m
Debt Nil Directors & Management 2.5%
Market capitalisation1 A$98m
70,000,000 $0.08
2
$0.07
60,000,000
Volume (shares traded on ASX per day)
$0.06
50,000,000
OEL Share Price (A$ per share)
$0.05
40,000,000
$0.04
30,000,000
$0.03
20,000,000
$0.02
10,000,000
$0.01
0 $0.00
August 2017
June 2017
December
June 2018
April 2018
February
October 2017
2018
2017
1. Undiluted at 6.4 cents per share as at 30 July 2018
2. ASX 200 Energy Index normalized to 30 June 2017 OEL share price
3. Convertible notes issued for US$8.2m on 2 August 2017. Conversion price of 5.5 cps, maturity 30 June 2019. The notes have a face value of US$1.00 and may be converted at A$0.055 (subject to reduction
due to rights issue per LR 6.22.2). Note that the conversion price will reduce to A$0.05484 per share as a result of the rights issue.
4. As at 30 June 2018.
OTTO ENERGY | ASX : OEL 21Board and Management
John Jetter – Non-Executive Ian Macliver – Non-Executive Ian Boserio – Non-Executive Director.
Chairman. Director. BComm, FCA, SF Fin, BSc (Hons)
LLB, BEc INSEAD FAICD Executive Technical Director of
Former MD/CEO J.P. Morgan Managing Director Grange Pathfinder Energy Pty Ltd. Former
Germany. Non-Executive Director Consulting. Non-Executive executive positions with Shell &
of Venture Minerals and Peak Chairman of Western Areas. Woodside in international exploration
Resources Ltd. roles.
Matthew Allen – Managing Director Paul Senycia – Exec Director, David Rich – Chief Financial Officer &
& CEO. Exploration and New Ventures. Company Secretary. BCom. FCA,
BBus, FCA, FFin, GAICD BSc (Hons), MAppSc GAICD, Grad.Dip.CSP AGIA
Global exposure to the upstream oil International oil & gas experience Experienced public company CFO with
and gas industry with over 18 years gained over 35 years. Specific focus the last 16 years as CFO of upstream
experience in Asia, Africa, USA, on Australia, USA, South East Asia oil and gas companies with
Australia and Middle East. Previous & Africa. Previous roles at Beach, international interests including in
senior roles with Woodside over an 8 Woodside Energy and Shell Australia, Asia and the USA.
year period. International.
OTTO ENERGY | ASX : OEL 22Houston Office Technical Team
110+ years of Gulf Coast and Gulf of Mexico experience
Will Armstrong – Vice President, Exploration and New Ventures
Prior to joining Otto Will worked with Tri-C Resources, a privately owned Houston based oil and gas company, developing Gulf Coast conventional
prospects for drilling. Prior to joining Tri-C Resources, Will screened Gulf Coast, Offshore GOM, and Deepwater GOM prospects for Continental Land &
Fur between 2007 and 2014. Between 1999 and 2007, Will worked as a geophysical consultant, generating Offshore and Gulf Coast prospects on behalf of
Houston Energy, Westport Resources, and Petroquest Energy. Prior to consulting, Will had generated prospects for several Houston-based independent
oil & gas companies, including being a founding member of Newfield Exploration. Will began his career at Tenneco Oil Company in 1987 in Lafayette.
Will graduated with a B.S. in Geology, minor in Mathematics, from Grand Valley State College in 1985. He also graduated from Wright State University with
a M.S. in Geology, emphasis in Geophysics and Hydrogeology, in 1987.
Philip Trajanovich – Senior Commercial Manager
Philip was engaged by Otto as a commercial manager in July 2016 and has worked in both the Perth and Houston offices since that time. Prior to joining
Otto, Philip was Commercial Manager at Aurora Oil and Gas and its subsequent acquirer Baytex Energy for over four years, focused on the Eagleford
shale unconventional play. Philip has also worked with ConocoPhillips as an Asset Manager for nearly three years and Woodside Energy as a Commercial
Adviser for over seven years. Philip has gained extensive experience in all facets of upstream oil and gas operations and commercial structures
internationally and within the USA.
Philip graduated with a B.Com with First Class Honors from the University of Western Australia in 2001.
Mark Sunwall – Senior Exploration Consultant
Mark Sunwall was engaged as a senior exploration consultant by Otto in April 2016. Mark has a successful 40+ year career exploring and developing
onshore Gulf Coast and Gulf of Mexico petroleum basins with major and independent oil companies. Mark has been instrumental in the establishment of
the Houston business to date and brings a wealth of knowledge and extensive networks to Otto.
Prior to joining Otto, Mark worked for Aurora Oil & Gas for four years as the Geoscience Manager focused on the Eagleford shale unconventional play. In
addition, Mark has over five years’ experience with a small independent oil and gas company in Houston, has worked with Woodside Energy for over four
years and started his career with Texaco (subsequently acquired by Chevron) spending over twenty six years with Texaco.
Mark graduated with a B.S. in geology from Southwest Minnesota State University in 1974. Mark also has a M.S. in geology from Miami University and
graduated in 1976.
Kevin Small – Senior Exploration Consultant
Kevin has over forty years’ experience in the Gulf of Mexico both onshore and offshore, and has been responsible for the generation, farm-in, drilling and
development of numerous Gulf Coast discoveries. Kevin similarly brings extensive networks and relevant experience to Otto’s business in Houston.
Prior to joining Otto Kevin worked with Tri-C Resources, a privately owned Houston based oil and gas company, developing Gulf Coast conventional
prospects for drilling. Between 2003 and 2012, Kevin worked for Bluestreak Exploration Group developing prospects exclusively for LLOG Exploration,
successfully generating discoveries on the Gulf of Mexico Shelf and Deepwater. Kevin was the Exploration Manager and a founding member of the
Houston office of Westport Oil and Gas Company between 1996 and 2003, ultimately helping them go public in October, 2000. Kevin also has worked for
the Superior Oil Company and McMoran Oil and Gas, starting his career in 1978. During his time with LLOG, Westport, and McMoRan, he has drilled wells
with cumulative production of over 692 BCFG and 82 MMBO.
Kevin graduated with a B.S in Geophysical Engineering from the Colorado School of Mines in 1978.
OTTO ENERGY | ASX : OEL 23Reserves & Prospective Resources
Notes and subsequent events
• The B65 interval, which was discovered in the SM 71 F2 well in December 2017, had a Prospective Resource at 30 June 2017 of 2.869 MMboe
(Otto’s 50% working interest share).
• The SM 71 F3 well also intersected the B55 and C10 zones which were not included in the above prospective resources at 30 June 2017.
• Otto’s Bivouac Peak interest has reduced to 40% WI and 29.8%NRI. Refer ASX release 9 July 2018.
• The Alaska prospective resources do not include the transaction or the 75 MMbbl prospect (Otto’s 18.75% net revenue interest) as set out on slide
17 and as released to ASX on 25 June 2018.
• Not included in the above is Otto’s the right to participate for a 50% working interest (43.75% net revenue interest) in VR 232 in the Gulf of Mexico
adjacent to SM 71. The Operator, Byron, has mapped a gas and gas condensate prospect on the block with in‐house calculated gross prospective
resource potential of 11 Bcf and 170,000 barrels (4.8 Bcf and 74,000 barrels NRI). Refer to the ASX release of 19 June 2018 for further information.
• The Gulf Coast Package prospective resources set out on slide 6 are not included in the above table.
• Refer to Otto Energy’s announcement to ASX on 28 September 2017 for full information on the SM 71 independent Reserves Report prepared by
Collarini and Associates as at 30 June 2017. Please also refer to the cautionary statements on slide 33 regarding reserves and prospective
resources.
OTTO ENERGY | ASX : OEL 24Pro Forma Consolidated Statement of Financial Position
Placement and Notes
Proforma
Gulf Coast Entitlement
31-Dec-17 Package Issue 31-Dec-17 1. Derived from the 31 December 2017 financial statements of Otto
US$’000 US$’000 US$’000 US$’000 Energy Limited which were reviewed by the Company’s independent
Current assets auditor, BDO. These can be obtained from the Company’s web site at
www.ottoenergy.com.
Cash and cash equivalents 15,024 (4,000) 15,608 26,632
Trade and other receivables 95 - - 95 2. Under Otto’s accounting policy, exploration is expensed as incurred,
Other assets 423 - - 423 hence the initial land and other costs paid for the Gulf Coast
Package would have been expensed at 31 December 2017.
Total current assets 15,542 (4,000) 15,608 27,150
3. The notes to the financial statements would have recorded the
Non-current assets commitment amount of US$33.5 million for the eight well program.
Oil and gas properties 16,061 - - 16,061 4. The placement and entitlement issue amount is calculated as A$20
Property, plant and equipment 11 - - 11 million at the 31 December 2017 USD:AUD exchange rate of 0.7804.
Other assets 325 - - 325 Costs of the raising have not been included.
Total non-current assets 16,397 - - 16,397 5. The Pro Forma Historical Combined Statement of Financial Position
Total assets 31,939 (4,000) 15,608 43,547 has been prepared solely for inclusion in this investor presentation
to provide shareholders with an illustration of the combined
Current liabilities consolidated financial position of the Company as if the proposed
farmin to the Gulf Coast Package and the associated Placement and
Trade and other payables 2,952 - - 2,952
Entitlement Offer had occurred at 31 December 2017.
Income tax payable 1 - - 1
Provisions 195 - - 195 6. Due to its nature, the Pro Forma Consolidated Statement of
Financial Position does not represent the Company’s actual or
Total current liabilities 3,148 - - 3,148
prospective financial position.
Non-current liabilities 7. The Historical Financial Information is presented in an abbreviated
Interest bearing loans and form and does not include all of the presentation, disclosures,
borrowings 10,057 - - 10,057 statements or comparatives required by Australian Accounting
Provisions 938 - - 938 Standards (“AAS”) applicable to general purpose financial reports
prepared in accordance with the Corporations Act.
Total non-current liabilities 10,995 - - 10,995
Total liabilities 14,143 - - 14,143 8. The Pro Forma Consolidated Statement of Financial Position has
Net assets 17,796 (4,000) 15,608 29,404 been prepared on a consistent basis with the Company’s accounting
policies as disclosed in its financial statements for the year ended
30 June 2017.
Equity
9. The Pro Forma Historical Combined Statement of Financial Position
Contributed equity 90,704 - 15,608 106,312 does not include the impact of normal trading of the consolidated
Reserves 13,758 - - 13,758 entity, including revenue and capital expenditure, which has
Accumulated losses (86,666) (4,000) - (90,666) occurred since 31 December 2017;
Total equity 17,796 (4,000) 15,608 29,404
OTTO ENERGY | ASX : OEL 25Key Risks
Impairment of carrying value of properties
Otto may be required to write‐down the carrying value of its oil and gas properties when oil and gas prices are low. Under International Financial Reporting Standards, which Otto is
required to comply with, the net capitalised costs of its oil and gas properties may not exceed the fair value of the properties. If net capitalised costs of its oil and gas properties
exceed the fair value, Otto must charge the amount of the excess as an impairment to earnings. This type of charge will not affect Otto's cash flows, but will reduce the book value of
its Shareholders' equity. Because the oil price Otto uses to estimate future net cash flows is a forecast, actual cash flows and carrying value may materially differ. Otto reviews the
carrying value of its properties whenever impairment indicators exist and once incurred, a write‐down of oil and gas properties may be reversible at a later date if prices increase.
Information risk
Otto's analysis of the Gulf Coast Package, including estimates of the associated prospective resources, is based in part on information provided by Hilcorp. Independent engineers
have not provided a report regarding the estimates of prospective resources with respect to the Gulf Coast Package. As a result, the assumptions on which Otto's internal estimates
of prospective resources included in or incorporated by reference in this Presentation have been based may prove to be incorrect in a number of material ways, resulting in Otto not
realising expected benefits of the Gulf Coast Package. In addition, the representations, warranties and indemnities of Hilcorp in the transaction document are limited, and Otto may
not have recourse against Hilcorp in the event that the acreage does not perform as expected.
Risk that expense estimates differ materially from actual amounts
The prospective resources and future potential cash flow estimates with respect to the Gulf Coast Package are based on Otto's analysis of geological and geophysical data,
assumptions regarding drilling and other capital and operating expenditures (including transport and pipelines) and anticipated production rates.
These estimates are based on estimates of Otto technical staff and contractors without review by an independent petroleum engineering firm. Data used to make these estimates
was furnished by Hilcorp or obtained from publicly available sources. Otto cannot assure shareholders that these estimates of prospective resources, capital expenditure and
production rates are accurate. After such data is reviewed by an independent petroleum engineering firm, or further by Otto, the prospective resources and production related to the
Gulf Coast Package may differ materially from the amounts indicated.
Underwriting risk
Otto has entered into an underwriting agreement under which the Lead Manager, Bookrunner and Underwriter Morgans Securities Limited (Morgans) has agreed to fully underwrite
the Entitlement Offer, subject to the terms and conditions of the underwriting agreement between Otto and Morgans (Underwriting Agreement). The Underwriter's obligation to
underwrite the Entitlement Offer is conditional on certain customary matters, including Otto delivering certain certificates, sign-offs and opinions. If certain events occur, the
Underwriter may terminate the Underwriting Agreement.
Termination of the Underwriting Agreement could have an adverse impact on the amount of proceeds raised under the Entitlement Offer. If the Underwriting Agreement is
terminated, Otto would not be able to terminate the Hilcorp transaction. In these circumstances, Otto would need to utilise alternative funding to meet its obligations under the
Hilcorp transaction, which could adversely affect Otto's business and financial condition.
Investment risk
There are general risks associated with investments in equity capital. The trading price of Otto shares may fluctuate with movements in equity capital markets in Australia and
internationally. This may result in the market price for the New Shares being less or more than the offer price. The New Shares to be issued pursuant to this offer carry no guarantee
with respect to the payment of dividends, return on capital or the market value of those New Shares.
Importantly, Otto has never declared or paid cash dividends on Shares apart from the dividend (and capital return) in 2015 after the sale of the Galoc field. The Company currently
intends to retain future earnings and other cash resources, if any, for the operation and development of its business and does not anticipate paying any cash dividends on Shares in
the foreseeable future. Payment of any future dividends will be at the discretion of the Board after taking into account many factors, including financial condition, operating results,
current and anticipated cash needs and plans for expansion.
In addition, the terms of the Company's outstanding convertible notes restrict it from paying cash dividends on Shares. Any future dividends may also be restricted by any debt
financing arrangements entered into from time to time.
OTTO ENERGY | ASX : OEL 26Key Risks
Future issuances or sale of significant amounts of Shares
The future issuance of a substantial number of Shares (including under the Capital Raising), or the perception that such issuance could occur, could adversely affect the prevailing
Share price. Sales of a substantial number of Shares in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number
of Shares intend to sell Shares, could reduce the Share price.
A decline in Share price could make it more difficult to raise funds through future offerings of Shares or securities convertible into Shares.
Funding risk
The Company may require capital in addition to the Capital Raising (following completion of the budgeted work program through 2018/19), in order to fund development activities or
for additional acquisitions. Failure to obtain such finance in a timely manner could impact its ability to execute its work program or secure acquisition opportunities. There is no
assurance that the capital or debt markets will provide additional funding on reasonable terms or at all. Uncertainty in domestic and international credit markets could materially
affect the Company’s ability to access sufficient capital for its capital expenditures and acquisitions and, as a result, may have material adverse effect on the Company’s ability to
execute its business strategy and on its business, financial condition, results of operations and prospects. The possibility of material dilution for Shareholders also exists especially
if equity raisings are completed during a period of general market or Company share price weakness.
Failure to achieve production targets
The funding of the future drilling of the Gulf Coast Prospects has been estimated based on the achievement of production targets at SM 71. There is a risk that SM 71 does not meet
these targets.
Reserves risk
Reserves assessment is a subjective process that provides an estimate of the volume of recoverable reserves. Oil and gas estimates are not precise and are based on knowledge,
experience, interpretation and industry practice. Petroleum engineering is a subjective process of estimating accumulations of oil and/or natural gas that cannot be measured in an
exact manner and which involves the use of assumptions which may ultimately not prove to be accurate. Different variables can impact whether these reserves are economically
recoverable, including changes with respect to governmental regulations, commodity prices, and taxes. The Company’s actual revenues, expenses, and production will likely vary
from such estimates and such differences could be substantial.
The rate of production from oil and gas properties generally declines as reserves are depleted. Except to the extent that Otto acquires further properties containing additional
reserves, conducts successful exploration and development activities or, through engineering studies (including geoscientific and exploration studies), identifies additional reserves
on its existing properties, its reserves will decline as its production continues. Otto's future oil and gas production is, therefore, dependent upon its level of success in acquiring,
finding and/or developing additional reserves. Because Otto's revenues and profits are derived from its oil and gas operations, its results of operations and financial condition are
directly related to the success of its exploration, acquisition and development efforts and its ability to replace existing reserves. A failure to acquire or discover new reserves or
enhance existing reserves in sufficient quantities to maintain or grow the current level of its reserves could have a material adverse effect on its business and financial
performance.
This presentation also contains production data for other oil and gas companies in Australia and the US. This information was sourced from publicly available information. Otto has
not verified the accuracy of this information and does not warrant that the information is accurate or complete.
OTTO ENERGY | ASX : OEL 27Key Risks
Commodity price risk and volatility of oil and gas prices
The Company’s main business activities are currently highly exposed to movements in global oil prices and to a lesser extent, changes in gas prices. The prices of oil, natural gas
and other hydrocarbon products remain outside the control of the Company. A significant change in commodity prices would impact the company’s profitability and in meeting its
forecasts.
The prices of oil and natural gas have fluctuated greatly in response to changes in many factors. Currently Otto is in a situation where oil (and to some extent also natural gas)
prices have recovered compared to levels seen over the last few years, although oil prices are still much lower than the highs of early 2014. There are several reasons for this but
fundamental market forces beyond Otto’s control or the control of other market participants have impacted and will continue to impact oil and natural gas prices in the future.
Generally, Otto does not and will not have control over the factors that affect the prices of oil and natural gas. These factors include:
• economic and political developments in resource‐producing regions;
• global and regional supply and demand;
• the ability of the Organisation of the Petroleum Exporting Countries and other producing nations to influence global production levels and prices;
• government regulations and actions;
• global economic conditions;
• war or other international conflicts;
• changes in population growth and consumer preferences;
• the price and availability of new technology; and
• weather conditions
It is impossible to predict future price movements for oil and natural gas with certainty. A prolonged period of low oil and natural gas prices will adversely affect Otto's business,
the results of operations, financial condition, liquidity and its ability to finance planned capital expenditure, including possible reductions in capital expenditures which could offset
replacement reserves. Rapid material and/or sustained reductions in oil, gas or product prices can have an impact on the validity of the assumptions on which strategic decisions
are based and can have an impact on the economic viability of projects that are planned or in development.
Currently Otto has no hedging in place for future oil sales. Hedging of future oil production is considered on an ongoing basis and Otto may hedge in the future.
Exploration and development risk
Oil and gas exploration and production activities are inherently subject to numerous risks, including the risk that drilling will not result in commercially viable oil and gas
production. The identification of drilling locations relies on technical interpretation and is therefore subjective in nature and subject to numerous geological risks. Further, the
successful drilling of a productive well is also subject to numerous technical drilling and completion risks.
Reliance on key personnel
The Company's primary intellectual asset is the skill and experience of its staff. It is essential that appropriately skilled staff be available in sufficient numbers to support the
Company's operations. While the Company has initiatives to mitigate this risk, including implementing special training programs, loss of key staff or failure to attract new staff may
have a negative impact on the financial performance or otherwise of the Company and in particular its ability to expand its business. The loss of key staff to a competitor may
magnify this impact. There can be no assurance that Otto will be able to continue to attract and retain all personnel necessary for the development and operation of the business.
OTTO ENERGY | ASX : OEL 28Key Risks
Environmental risks
Potentially hazardous activities arise in connection with Otto's business. A significant safety or environmental incident or the failure of safety processes or of occupational health
plans, as well as a breach of regulatory or contractual obligations, could materially adversely affect results of operations and reputation. Otto is also subject to laws and
regulations governing health and safety matters to protect the public, employees and contractors, who could potentially be harmed by these activities, as well as laws and
regulations relating to pollution, the protection of the environment, and the use and disposal of hazardous substances and waste materials.
The cost of future environmental remediation obligations is often inherently difficult to estimate and uncertainties can include the extent of contamination, the appropriate
corrective actions and share of the liability. If more onerous requirements are imposed or the Company’s ability to recover costs under regulatory frameworks changes, this could
have a material adverse impact on the business, reputation, results of operations and financial position of Otto.
Otto may be exposed to a number of potential impacts of climate change over time, which could lead to demographic changes, changes in consumption patterns and physical risks
to Otto's operations and facilities. As a result, the potential impact from climate change, both physical and as a result of new related policies and regulations, may have an adverse
impact on Otto's operations or financial performance.
Operating hazards and natural disasters
Otto is subject to operating hazards normally associated with the exploration for, and production of oil and gas. Operating hazards may be due to technical integrity failure, loss of
well control, vessel collision, loading or unloading operations, an aviation incident, a pipeline incident or cyber-attack. Operating hazards along with natural disasters (eg
hurricanes), inclement weather, acts of terrorism, operator error or other occurrences can result in adverse events, including, without limitation, diminished production, additional
costs, major unplanned outages, labour disruptions, fires, equipment failure, loss of well control, blowouts, cratering, pollution and oil spills.
The occurrence of any such operating hazard or risk could result in substantial losses to Otto due to injury or loss of life and damage to or destruction of oil and gas wells,
formations, production facilities or other properties and the environment, as well as regulatory action, legal liability and damage to Otto’s reputation. The effect could be
particularly significant were an event of this nature to occur at Otto’s SM 71 field, which constitutes all of Otto's production, and therefore a sustained interruption in its production
could have an adverse effect on Otto's financial performance. Additionally, Otto's operations are often conducted in difficult or environmentally sensitive locations, in which the
consequences of a spill, explosion, fire or other incident could be greater than in other locations. Accordingly, the risk of Otto's failure to abide by environmental and safety and
protection standards is inherent in Otto's operations. Such failure could lead to damage to the environment, and result in regulatory action, legal liability, material costs and
damage to its reputation. It could also impact Otto's licence to operate. In certain circumstances, liability could be imposed irrespective of fault.
Regulatory risk
Changes in law or regulation or regulatory policy and precedent could result in a materially adverse effect. Decisions or rulings concerning, for example, whether licences,
approvals or agreements to operate or supply are subject to new, more onerous regulatory requirements impacting timely recovery of incurred expenditure or obligations, the
ability to pass through commodity costs and other decisions relating to the impact of general economic conditions on Otto, its markets and customers and in relation to proposed
business development activities, could have a material adverse impact on results of operations, cash flows, the financial condition of the business and the ability to develop the
business in the future.
Occupational health and safety risk
The conduct of exploration for, and production of, hydrocarbons may expose Otto's staff to potentially dangerous working environments. Occupational health and safety legislation
and regulations differ in each jurisdiction. If any of Otto’s employees suffered injury or death, compensation payments or fines may have to be paid, and such circumstances could
result in the loss of a license or permit required to carry on the business, or other regulatory sanction, all of which have the potential to impact Otto’s cash flow, operations and
ability to make future distributions (should Otto decide to do so).
OTTO ENERGY | ASX : OEL 29Key Risks
Industry competition and energy demand
The availability of a market for oil and gas in the future will depend in part on cost and availability of alternate fuels, the level of consumer demand, the extent of domestic production
of oil and gas, the extent of important foreign oil and gas, the cost of and proximity of Otto projects to pipelines and other transportation facilities, regulations by state and federal
authorities and the cost of complying with applicable environmental regulations. There is a risk that increased industry competition could impact on oil and gas supply and demand
that could negatively impact on prices and therefore on Otto's business.
Insurance risk
Otto maintains insurance against losses and liabilities in accordance with customary industry practices and in amounts that management of Otto believes to be prudent. However,
insurance against all operational risks is not available to Otto. Otto does not carry business interruption/loss of profits insurance. Otto may elect not to carry insurance with regard to
specific risks if management of Otto believes that the cost of available insurance is excessive relative to the risks presented.
In addition, losses could occur for uninsured risks or in amounts in excess of existing insurance coverage. Otto cannot insure fully against pollution and environmental risks. Otto
cannot assure Shareholders that it will be able to maintain adequate insurance in the future at rates they consider reasonable or that any particular types of coverage will be available.
In the event that there are insufficient insurance arrangements in place, Otto may be exposed to material capital losses, or losses that may impact revenue generation and the
financial performance of the Company.
Inability to achieve future growth
Otto may experience difficulty in achieving and managing future growth.
Otto has experienced growth in the past primarily through expansion of its drilling program. Future growth may place strains on financial, technical, operational and administrative
resources and cause Otto to rely more on project partners and independent contractors, possibly negatively affecting its financial position and results of operations. Otto's ability to
grow will depend on a number of factors, including the results of its drilling program, hydrocarbon prices and access to capital along with its ability to:
• obtain leases or options on properties, including those for which Otto has 3‐D seismic data;
• acquire additional 3‐D seismic data;
• identify and acquire new exploratory prospects;
• develop existing prospects;
• continue to retain and attract skilled personnel; and
• maintain or enter into new relationships with project partners and independent contractors
Otto may not be successful in upgrading technical, operations and administrative resources or in increasing its ability to internally provide certain of the services currently provided by
outside sources, and Otto may not be able to maintain or enter into new relationships with project partners and independent contractors. Otto's inability to achieve or manage growth
may adversely affect its financial position and results of operations.
Exchange rate risk
The revenues, expenses, earnings, assets and liabilities of the Company, as well as the listed price of the Company Shares and, accordingly, your investment in the Company, may be
exposed adversely to exchange rate fluctuations. All Otto’s revenues are derived from USD sales and the majority of the Company’s expected expenditure will be in USD. Otto’s
functional and presentation currency of its financial statements is also USD. Any appreciation of the AUD against the USD effectively reduces the AUD value of the revenue net of the
USD costs and reduces the AUD value of net assets. Further, any appreciation of USD against the AUD will have a detrimental impact on the use of AUD funds raised for the purposes
of USA expenditure. The Company does not presently engage in currency hedging to offset any risk of currency fluctuations however the current policy is to hold the majority of its
cash balances to United States dollars.
OTTO ENERGY | ASX : OEL 30You can also read
